Are you looking for a French mortgage to finance your property purchase in France?
France is one of the most popular tourist destinations in the world so it’s not surprising that many choose to buy a property in or near their favourite French holiday location. With its interesting history, stunning diverse landscape and rich culture, France can still offer property at bargain prices, providing you don’t mind getting your hands dirty, from beautiful town, village and country houses, to stunning Maison de Maître and Château. It is an exciting, albeit daunting, prospect to go house hunting in a foreign country so being prepared is a huge benefit. Mortgages in France are governed more strictly than in most other European countries, looking after the borrower to make sure repayments can be met and managed for the duration of the loan.
Mortgages in France – Start your plans early
Searching for the right property is of course very important but, it is essential you start organising the funds with which to purchase your dream French property as early as possible to avoid many of the stresses and anxieties associated with property purchase. Unless you are fortunate enough to be able to purchase your property in France outright with existing funds you will need to find a mortgage lender. Some buyers refinance their existing property, especially if their new property in France is going to be a holiday home, where others will look to borrow the funds from a mortgage in France. Most French banks and lenders will give you a good idea of what you can borrow before you start your French property search.
Considering the preliminary contract
If a mortgage is an essential ingredient to funding your French purchase, make sure a clause is inserted in the preliminary sales contract (commonly know as the sous seing prive or compromis de vente) stating that your purchase is subject to you attaining a mortgage. This way you will be safe from losing your deposit should the mortgage be refused.
When you sign the preliminary contract you will be asked by the Notaire to provide details of the lender and the amount you intend to borrow. This is just a formality and doesn’t mean you can’t approach more than one mortgage provider. If your mortgage applications are refused, you will need to provide the Notaire with a document/certificate (attestation) from the lender mentioned in the contract saying that you have been refused a mortgage.
How much am I allowed to borrow?
The British are used to calculating how much they can borrow by multiplying their gross yearly earnings by a factor of 3, or thereabouts. In France the calculation is made in a different way and is based on the ratio of a person’s financial commitments compared to their gross earnings. In most cases this should not exceed a ratio of 1.3, or 33.3%. Therefore, your financial commitments (loans, mortgage repayments including the one needed to purchase your French home, rent and any enforced maintenance payments) should not exceed one third of your gross regular income. This may seem strict compared to UK lending institutions but the system is geared to protect the home buyer by ensuring that they live within their means rather than stretching their finances to the limits.
The applicants financial situation has to be qualified before a mortgage calculation can be made, and is based on the household’s residual income and outgoings. Their debt ratio should be approximately 33%, and depending on residual income, no more than 45%. Rental income can be taken into account but only at a ratio of 75%. A simple equation is shown below.
Debt ratio = Outgoings/Income (‘outgoings’ divided by ‘income’)
Advantages of borrowing in France
- Using your French property as security against a French mortgage avoids encumbering any assets from your home country
- Applicants can therefore retain equity in their home as a safe guard for the future
- French consumer law is particularly protective
- In certain cases, a French mortgage can reduce French tax exposure
- Obtaining a Euro mortgage in France for the Euro property purchase avoids large currency transfers
There are several very important factors to bear in mind before you apply for a French mortgage. The lending institution, most likely to be a bank, in France, regards your long term financial sustainability paramount; It needs to know that you’ll be able to pay your mortgage over the whole term of its existence. Proof of regular income is essential, as is its long term viability. Therefore, be warned, do not leave your current employment in your home country before applying for a mortgage in France, and equally, don’t mention if you are likely to be leaving your employment in the short term. However, French banks do not share information.
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Our partner French mortgage provider has been providing non-resident property buyers with mortgages for more than 20 years, and has built a reputation as France’s leading provider of specialist mortgages for international buyers.They are one of the most respected and recognisable banking groups in the world of finance. Using their vast experience, they aim to provide property buyers from countries around the world with the home loans they need to buy property in France. Communication and documentation can be presented in French, English, Dutch and Italian.
To apply for an Information Pack or to enquire about a French mortgage, please fill in the enquiry form below and an information pack will be sent and/or a representative will contact you direct to discuss further. Please bear in mind that not all countries are catered for as there are various restrictions and complications associated with certain countries’ laws.